Florida residents are in some big trouble for their Bitcoin trading -- they better find a good lawyer.

Owners of localbitcoins.com are accused of violating local laws

New York and California are currently contemplating whether to require licenses for businesses and individuals who deal in Bitcoins. However, Florida has taken things a step further, becoming the first state to criminally charge individuals running an unlicensed Bitcoin "exchange".

Introduced in 2008 by a programmer or group of programmers using the pseudonym Satoshi Nakamoto, the Bitcoin was the first of its kind, turning the science fiction fantasy of a decentralized, encryption-based global currency into reality.

But the Florida case raises serious new questions for those involved in Bitcoin business.

The new charges follow a lengthy investigation and involve a series of active users of the site localbitcoins.com.

Unlike large money exchange sites, localbitcoins.com is more like the Craigslist of Bitcoin, and is believed by some to be one of the few remaining "anonymous" ways to buy Bitcoin. Users would post requests for either Bitcoins or U.S. currency, and would arrange face-to-face meet-ups to carry out the trade. While it is perhaps flawed to believe that real world meet-ups in today's digital age provide greater anonymity, that hasn't stopped the site from becoming a popular place to trade Bitcoins for U.S. cash and vice versa.

Met with officers to arrange a $30,000 USD transaction, but did not complete deal.

Was told by undercover officer that the coins purchased would be used to pay for credit cards stolen in the hack of Target Corp. (TGT) (a ficitious objective).

Had 403 Bitcoins (~$360,000 USD) in his wallet

A third undisclosed individual

It seems unlikely they had no idea that they might have been assisting in money laundering. Specifically, they clearly had performed a large amount of transactions and had charged lucrative fees -- over a 15 percent premium over market values in some cases -- in exchange for not asking questions.

Given that Mr. Reid did not complete the exchange in question, it's possible he could see a reduced sentence or even be found innocent if he gets a good lawyer.

But when examined, the fees for becoming a licensed exchange aren't really that high in Florida -- around $1,000 USD or less per year. Given the money these men were making they were at the least very sloppy, and at worst were aware that if they went legit, they might lose many of their high profile clients.

III. Feds, State Law Enforcement No Longer Casting Blind Eye to Bitcoin

These actions follow in the footsteps of less punitive federal actions from last year. In early-to-mid 2013 the FinCEN started cracking down on unregistered Bitcoin money exchanges, including those that were based overseas. But most were let off without felony charges.

New York and California state regulators have been debating requiring state licenses for Bitcoin exchanges with offices in state. Some in these states have also suggested that business associated with Bitcoin -- such makers of wallet apps -- should have to apply for some sort of formal "Bitcoin license" and pay fees to the state.

Things ratcheted up earlier this month at the federal level with the FinCEN indicting Robert "BTCKing" Faiella, 52 -- a Bitcoin trader -- and Charlie "Yankee" Shrem, 24, chief executive officer and compliance officer at the Bitcoin exchange company BitInstant.com with money laundering charges.

Charlie Shrem is among two men facing federal money laundering charges for a bitcoin trading operation. [Image Source: Reuters]

Given Mr. Shrem's background as a former young star of the financial industry executive space and his position as a VP of The Bitcoin Foundation, the arrest was considered very shocking.

But federal agents painted a relatively convincing picture, revealing how they had monitored Mr. Shrem pretend to reject Mr. Faiella's advances on official email channels, while secretly instructing him on how to arrange illicit transactions associated with the underground marketplace Silk Road in parallel private communications. The pictured painted was damning enough that Mr. Shrem was forced to resign from The Bitcoin Foundation, which does not condone illegal uses of the cryptocurrency.

So far, Florida is the first state to actually put forth a solid policy and charge Bitcoin entrepreneurs with a crime. And while the trading described was certainly in essence digital money laundering, we haven't yet heard details indicating whether the traders were as brazen in their conversations about breaking the law as Mr. Shrem and his partner were.

In that regard the latest case could be viewed as the latest tightening of the thumbscrews on those who would abuse the growing money traffic route.

Documents filed in the Florida case reiterate that those who think that real world activities associated with Bitcoin are magically more secure are foolish. The federal indictment notes that law enforcement has actually come to appreciate how "highly traceable" Bitcoin is. Indeed when a Bitcoin transaction occurs an announcement is sent out to all users, creating a digital trail of all transactions in the economy. Law enforcement can use that information against you in court.

So far such worries have not been able to prevent the growth in adoption of the popular payment technology, but as Bitcoin continues to push further into the mainstream, they may start to take impact. For now Bitcoin businesses must tread carefully in the promising field, lest they find their efforts -- earnest or otherwise -- earning them prison time as convicted felons.